In Canada, International Investors Find Luxury for Less

More interest is coming from Taiwan, Turkey, Iran and India

For years, the Canadian luxury residential market has been something of an open secret among certain investors, particularly in the U.S. and China. But with a favorable exchange rate —$1.27 Canadian to the U.S. dollar just this past week – Canada is becoming increasingly attractive to an expanded customer base of foreign buyers.

Most in demand are properties in Toronto, Montreal, Vancouver and Calgary, as well as the resort areas of Muskoka, Ontario, known as the Hamptons of the North; Sun Peaks and Whistler in British Columbia; Banff, near Calgary, and Mont Tremblant in Quebec.

Toronto homes are quickly bought

While the luxury market there has been strong for three or four years, Chris Kapches, president and CEO of Chestnut Park Real Estate in Toronto, said he is seeing a large influx of Asian investors for the first time.

One reason is the exchange rate, which he said has decreased luxury home prices in Toronto 9% for Asian buyers since 2012. Another is that home prices are about half what they are in Vancouver, a longtime hub for Chinese investment. But what makes Toronto particularly attractive to Asian investors, he said, is that the city has the best private schools in the country. Chinese families are buying homes for their children to live in while they get their educations.

No surprise, then, that on the most recent Christie’s list of the world’s hottest luxury markets, Toronto ranked No. 2. Most luxury properties in the city stay on the market for an average of just 15 days, Kapches said. Dan Conn, CEO of Christie’s International Real Estate, reported that his Toronto affiliates are finding homes are hitting the market with “sold” signs on the front yard. The average year-to-year home price in Toronto is up 15%; in Vancouver, 25%.

Even in this red-hot market, however, the catch phrase for Canadian real estate is “luxury for less.”

“When you consider New York, Paris, Monaco, Miami, Canada’s price points for luxury are less,” said Kapches. Conn agreed: “If you go to the trophy end of the spectrum, thinking about pricing in London, New York, L.A., Miami, the asking prices in Toronto, Canada’s largest city, are trading at a massive discount to the rest of the world.”

Brad Henderson, president and CEO of Sotheby’s International Realty Canada, pegged the price points for luxury homes as starting at $1 million-plus Canadian in Montreal or Calgary, double that range in Toronto and double again in Vancouver. In tonier neighborhoods, such as Bridle Path in Toronto, home prices average $4 million; in the Shaughnessy neighborhood of Vancouver, $6 million.

Opportunities outside of Vancouver

The popularity of Vancouver as a high-end city with excellent natural amenities — and housing prices to match — is creating opportunity markets nearby, particularly in Victoria, just across the Strait of Georgia. Victoria ranked No. 3 on the Christie’s list, a boom driven by what Conn called lifestyle arbitrage: Investors can access the same quality of life and amenities at a fraction of the cost.

A similar calculation is propelling the luxury market near Calgary, but for opposite reasons. There, investors aren’t looking to get out of a market at its high, but into a market at its low. According to Henderson, Alberta’s oil-driven economy is pushing down prices on luxury properties, making them very attractive to contrarian investors. One listing, for a property 18 miles outside Calgary, offers an 11,700-square-foot, five-bedroom mansion on 4.7 acres, with indoor pool, sauna and room for horses, for $4.6 million.

“If you are a contrarian,” Conn said, “it’s an incredible time to buy.”

At some point, he noted, the gap between Canada and the rest of the world’s luxury markets will start to close. But for now, from the perspective of risk-adjusted returns, there is no better place to invest.